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TAVIA GRANT

Monday, February 27, 2006

Merger-and-acquisition activity in Canada jumped 47 per cent to a near-record $166-billion last year amid “ideal market conditions,” investment banker Crosbie & Company Inc. said Monday.

All told, there were 1,244 announced transactions in 2005 — a rate of more than three a day, seven days a week, and a 42-per-cent increase over the 875 deals in 2004.

Thirty-four “mega-deals,” or transactions valued at more than $1-billion, contributed to the increase. They totalled $103-billion compared with 35 mega-deals valued at $48-billion in 2004.

Mergers and acquisitions rang up their strongest year since 2000 on the back of a robust North American economy, accessible financing, strong balance sheets and attractive valuations for sellers, Crosbie said. Almost half of the value of last year's deals were in natural resources.

“With a strong wind in its sail, the M&A market has raced to one of the best years on record,” said Ed Giacomelli, Crosbie's managing director said in a statement. “In contrast to the record year in 2000, the current M&A market is more broadly based and is still behaving rationally.”

The fourth quarter of 2005 saw a number of large hostile takeovers, lead by Barrick Gold Corp.'s $10.4-billion (U.S.) bid for Placer Dome Inc., creating the world's largest gold producer.

As well, Arcelor S.A. of Luxembourg made an unsolicited $4.9-billion offer for Dofasco Inc. Among other deals at the end of the year were U.S. corporate raider Carl Icahn, bidding $1.2-billion for majority control of Fairmont Hotels & Resorts Inc. and Jerry Zucker's hostile bid for Hudson's Bay Co., Canada's oldest company.

In the year ahead, “we expect strong conditions and positive market psychology to continue to drive activity into 2006,” said Mr. Giacomelli.

Of all of last year's transactions, 61 per cent of the total value involved cross-border activity. Twenty-seven of the 34 largest deals had an international component, the Toronto-based firm said.

Canadian companies set their sights abroad, making 338 purchases valued at $35-billion last year. At the same time, foreign companies made more than $65-billion worth of acquisitions in Canada last year, “reflecting the strong local economy and international demand for Canadian natural resources.”

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